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1 Payment Systems Trends in Japan Financial Market Infrastructure Trends and Birth of the Next Generation BOJ-NET May 2014 Eiichiro Yanagawa Senior Analyst, Asian Financial Services Group A recording of today s webinar and copy of the presentation will be available to Celent clients on our website at

2 About Celent Celent is an international research and consulting firm dedicated to helping financial institutions rapidly create new business and technology strategies Syndicated research on technology and business strategies in financial services Insurance Banking Securities and Investments Asian Financial Services Consulting and advisory services Vendor selection Technology roadmap Business innovation New market entry A part of Oliver Wyman Headquartered in Boston, with offices in New York, San Francisco, São Paulo, London, Madrid, Milan, Paris, Zurich, Beijing, Hong Kong, Seoul, Singapore, and Tokyo 1

31 From A Global Survey Transaction banking: A post-financial crisis focus for banks The global financial crisis (GFC) has created new opportunities for banks, as corporates have changed behavior and are increasingly focused on risk and liquidity management. In terms of revenue growth, transaction banking has outperformed investment and commercial banking in the post-financial crisis period. Transaction banking is an attractive business for banks because it presents a large revenue pool, stable revenue flow, and low risk; and creates stickier client relationships than any other product group. Bank intermediated trade-related transactions, for example have increased from 35% of all trade in 2007 to a projected 45% in These attractions have created intense competition in transaction banking services, among regional and local banks as well as the global incumbents. This is leading banks to: Enhance product and service menus. Automate processes. Increase straight through processing (STP). Build regional and global operational and technology platforms to support the business. Bank Intermediated Transactions as a Percentage of Total Transactions 60% 50% 40% 30% 20% 10% 0% 35% Source: Celent estimate 37% 39% 40% 42% 45% e 2015e 30

32 Asia and the US are often the primary focus for transaction banking business for global banks Over the next several years, the US and Asia will be the primary focus for transaction banking. The US is important not only due to its size but also as a means of winning business with US-based multi-national corporations (MNCs). The high level of intraregional trade in Asia, where global banks may not have a granular presence, is providing opportunities for regional and local banks, driving them to enhance their transaction banking capabilities. What will be your major regions for transaction banking in 2-3 years? Asia US Western Europe Middle East Latin America Eastern Europe Africa 8% 8% 17% 21% Source: Celent Transaction Banking Survey 25% 50% 50% 0% 10% 20% 30% 40% 50% 60% Intraregional Trade Flow as a Percentage of Total Trade 60% 50% 51.6% 40% 30% 20% 17.9% 17.5% 10% 0% Asia Europe North America Source: WTO, Celent 4.6% 2.8% 2.7% 1.6% Middle East Africa South / Central America CIS 31

33 Transaction banking is typically run on a regional or local basis Banks are working to expand their regional or global capabilities Building seamless global capabilities in transaction banking is a priority for a growing number of banks, but few banks have achieved globally integrated operations. Four-fifths of respondents to the Celent survey run their transaction banking on a regional or local basis. Even some global banks operate regionally or even country-by-country. About one-fifth of respondents say they have achieved a globally integrated operational platform capable of delivering follow-the-sun operations. Typically it is the large global banks that have built out these platforms. Some large regional banks aspiring to a global business have also achieved a global platform or are in the process of building out this capability. How are back office operations for your transaction banking business organized? 21% 36% Source: Celent Transaction Banking Survey 43% Separate business processing for each country Back office processing is consolidated by region Follow-the-sun operations 32

35 Final Thoughts Review the customer support from architecture: Service Innovation by Outsourcing Internal Processes Current Next Generation Customer Customer Internal process Front end Front end Internal process Segmentation, Customization Back end Back end Standardization External process External process Source: Celent 34

36 Thank you! My contact information: Eiichiro Yanagawa My business development colleague: Yuya Fukumori A recording of today's webinar and copy of the presentation will be available to Celent clients on our website after the event at 35

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